4.3 Micro

Question 1

What is the model of perfect competition?

Answer 1

Large numbers of producers
Identical products
Freedom of entry and exit
Readily available information

Question 2

How many producers are generally in a competitive market?

Answer 2

Many producers, each relatively small in size and price takers

Question 3

What are the products like in a competitive market?

Answer 3

Homogenous- all the same

Brand loyalty does not exist

Question 4

Are there barriers to entry?

Answer 4

No

Question 5

What is there in perfect competition?

Answer 5

Perfect knowledge

Question 6

What are the assumptions of perfect competition?

Answer 6

Few if any barriers to entry to a market
Products are identical (homogenous)
Consumers and firms have complete or perfect knowledge of all the products supplied by firms as well as their prices
Large numbers of buyers and sellers
Market eqm determines price
Buy and sell as much as they wish at the eqm price

Question 7

What does a perfectly elastic demand curve look like?

Answer 7

A straight horizontal line

Question 8

What are the advantages of perfect competition?

Answer 8

Productive and allocative efficiency

Pe goods and services produced at minimum average cost or when minimum inputs are used to produce maximum outputs